Exam 5: Externalities, Environmental Policy, and Public Goods

Some environmentalists have criticized tradable emission allowances on the grounds that they give permit holders a license to pollute.Furthermore, environmentalists argue that those who sell their permits receive a monetary benefit from their contribution to polluting the environment.Use economic reasoning to evaluate this criticism.

Figure 5-4 Suppose there are several paper mills producing paper for a market. These mills, located upstream from a fishing village, discharge a large amount of wastewater into the river. The waste material affects the number of fish in the river and the use of the river for recreation and as a public water supply source. Figure 5-4 shows the paper market. Use this Figure to answer the following question(s). -Refer to Figure 5-4.What does S₂ represent?

Figure 5-3 -Refer to Figure 5-3.At the competitive market equilibrium,

Figure 5-3 -Refer to Figure 5-3.The market equilibrium output level is

Conceptually, the efficient level of carbon emissions is the level for which

Figure 5-7 -Refer to Figure 5-7.Which of the following statements is true?

Economists Kenneth Chay and Michael Greenstone found that in the two years following the passage of the Clean Air Act of 1970, the sharp reduction in air pollution also led to a decline in infant deaths.Although this and other studies provide compelling evidence of the link between pollution and infant health, it is not clear that reductions from the much lower levels of ambient pollution today would have the same effect.Which of the following reasons could explain this?

Figure 5-16 Amit and Bree are the only two homeowners on an isolated private road. Both agree that installing street lights along the road would be beneficial and want to do so. Figure 5-16 shows their willingness to pay for different quantities of street lights, the market demand for street lights, and the marginal cost of installing the street lights. -Refer to Figure 5-16.What is the optimal quantity of street lights to install?

A negative externality is an example of market failure.The root of the problem lies in the definition and enforcement of property rights.Explain.

Congress passed the Clean Air Act in 1970.Since this act was passed, emissions of the six main air pollutants

Who was the economist who first proposed that governments use taxes and subsidies to correct for externalities?

In England during the Middle Ages each village had an area of pasture on which any family in the village was allowed to graze its cows and sheep without charge.Eventually, the grass in the pasture would be depleted and no family's cow or sheep would get enough to eat.The reason the grass was depleted was

In economics, the optimal level of pollution is

What is a Pigovian tax? What happens to deadweight loss when a Pigovian tax is implemented?

Figure 5-13 Figure 5-13 illustrates the market for gasoline before the government imposes a tax to bring about the efficient level of gasoline production. -Refer to Figure 5-13.If the government wanted to bring about the efficient level of gasoline production by imposing a tax, the tax would raise the price paid by consumers by ________ per gallon.

According to ________, in a market with an externality, private parties would voluntarily negotiate an efficient outcome without government intervention.

Figure 5-16 Amit and Bree are the only two homeowners on an isolated private road. Both agree that installing street lights along the road would be beneficial and want to do so. Figure 5-16 shows their willingness to pay for different quantities of street lights, the market demand for street lights, and the marginal cost of installing the street lights. -Refer to Figure 5-16.How much is Amit willing to pay per street light to have 4 street lights installed?

An advantage of imposing a tax on the producer that generates pollution is that

A product is considered to be excludable if it is jointly owned by all members of a community.

Goods can be classified on the basis of whether their consumption is